The 4-Step Framework
This is the first rule of market sizing: Before you do any math, you must ask these to define the scope (e.g., "Are we counting only New York City, or the whole state?").
What are Clarifying Questions?
The approximate population of the United States used for "Consultant Math."
What is 320 Million? (Note: Using 320M instead of 330M+ makes the math easier)
Consultants do this to numbers like 3,982 or 19% to make mental multiplication much faster and avoid "ugly" decimals.
What is Rounding?
To solve this, you first estimate the population of NYC, which is approximately this many people.
What is 8 Million?
Instead of just blurting out a number, you should walk the interviewer through your [Blank], which is the step-by-step "map" of your math.
What is your Structure (or Framework)?
This 4-letter acronym is the "Golden Rule" of grouping data. It means your segments don't overlap and you haven't left anyone out.
What is MECE (Mutually Exclusive, Collectively Exhaustive)?
The approximate population of Boston.
What is 700k?
To find the Annual market size for a product bought every month, you must multiply your monthly estimate by this "Magic Number."
What is 12?
You should segment the population by this "Demographic" first, because men and women often have different shopping habits.
What is Gender?
When you don't know a fact, you make an "Educated Guess" based on your own life, which consultants call an [Blank].
What is an Assumption?
This "Directional" approach starts with a large population (e.g., all of the U.S.) and filters down to a specific target group.
What is a Top-Down approach?
If you assume a flat population distribution and a life expectancy of 80 years, this is how many people are in each age year in the US?
What is 4 Million?
This is the "Zero-Counting" trick: When multiplying 2 million times 50, you should know the answer has this many zeros in total.
What is 8 zeros?
If the average person buys 4 shirts a year at an average price of $25, this is the "Annual Spend" per person.
What is $100?
At the end of the math, you should explain the "So What?", which is technically known by this term.
What is Synthesis (or Insight)?
When you finish your math and get a number like "700 Billion," you do this common-sense check to see if that number actually makes sense in the real world.
What is a Sanity Check?
When sizing a market for "Home Internet," you should use this U.S. "Anchor" number instead of the total population.
What is 100–120 Million Households?
This is the "Rule of 10%": If you need to find 15% of a number, you first find 10%, then add this to it.
What is half of the 10% value?
This is a "Premium" segment you might exclude or count separately because they buy significantly more than the average person.
What are Tourists or Fashion Enthusiasts?
If your calculation for "Tennis Balls" seems too high, you should identify which [Blank] you would change to make it more realistic.
What is a Variable (or Driver)?
While most beginners start with the total population, a pro might use this "Micro-to-Macro" method—calculating the revenue of a single location and multiplying it by the total number of stores in the country.
What is a Bottom-Up approach?
If you are sizing a luxury product, you might assume this percentage of the U.S. population is in the "High Income" bracket.
What is 20%?
When calculating a "Replacement Rate" (e.g., how many people buy new phones), you take the total number of owners and divide by this.
What is the Lifespan of the product?
If you find the NYC market is 32 million shirts, and there are 8 million people, this is the "Final Answer" for how many shirts the average New Yorker buys.
What is 4 shirts per year?
This 3-letter term refers to the total potential revenue a company could make if they captured every single customer in the market.
What is TAM (Total Addressable Market)?